Wednesday, December 5, 2007

Is Raising Kids a Fool's Game? Business Week Asks

A recent article by Karyn McCormack in Business Week discussed the high cost of raising a child: Is raising kids a fool's game? - BusinessWeek.com ("Is raising kids a fool's game? Parenting is fulfilling, but the financial burden can be overwhelming" Business Week, November 14, 2007). As the article points out, and as many of those who complain about high child support payments often fail to acknowledge, the actual direct costs to raise a child are very substantial. The U.S. Department of Agriculture's latest survey, for the year 2006, USDA Report: Expenditures on Children by Families, 2006, shows those in the top-third income bracket (gross income of $118,200 average) will spend approximately $289,380, or about $17,000 a year (in 2006 dollars) until their child is 18. That is nearly 15 percent of gross income for the extra costs for one child. The increased costs of housing, child care, education, and health care have taken an increasingly greater share of the earned income in most families over the past several decades.

And for this group of high earners, that may not be all. "Indeed, the USDA survey is probably understating the cost of raising kids," according to the article. "Considering extras like sports equipment, summer camps, private school, Disney vacations, and a full-time nanny, raising a child through age 17 could cost $1 million or more. Some parents throw extravagant birthday parties and won't hesitate to buy their kids the latest video games and cell phones and splurge on Spanish and painting lessons."

As for those below the top third, it is my suspicion (though I haven't yet looked at the recent data from the latest Agriculture Department Study myself) that those in lower income brackets spend an even greater percentage of their incomes on child-related costs than do those in the high income brackets.

Furthermore, the costs for parents, at all income levels, to raise a child do not end when the child is 18, if the child attends a college or other post-secondary institution. And of course, in addition to these direct expenses there are the hard-to-quantify "opportunity costs" of having a child: parents generally could earn more if they had no children to raise.

For some informative links regarding the costs of raising a child, including a link to a helpful "What does it cost to raise a child?" calculator, scroll down for the links in the bottom, righthand column of the child support worksheet page of my law firm website, at Massachusetts Child Support Guidelines Interactive Worksheet Page.

"....The Agriculture Dept.'s latest survey found that households in the top-third income bracket (with average pretax income of $118,200) will spend $289,380 by their child's 18th birthday—or about $17,000 a year (in 2006 dollars).

Parents' largest expense is housing, which makes up roughly a third of expenditures, given that it costs more for a larger home in a town with good schools. In terms of growth, the outlays for child care and education have climbed from just 1% of overall expenses in 1960 (when the USDA started tracking these costs) to 10% in 2006.

In 1960 education costs averaged around $362 per year (out of total expenses of $25,229 for middle income families). Health care is also sucking up more of parents' hard-earned cash given that premiums and co-payments have been rising, says USDA economist Mark Fino...."